It’s too bad there isn’t an asset for customer value listed on the balance sheets of building materials companies. Maybe then they would pay more attention to this important metric.
You measure your sales, your expenses, and your profits. But what makes building materials different is how much control a few channel customers have over your sales and profits.
If you sell to a big box, a national distributor, dealer or top builder, you pay attention to them. You assign your best people to these big customers. You know how hard it was to get their business. And you know how desirable they are and that your competitors are constantly trying to steal them away.
You monitor their sales volume on a regular basis. Your senior people are involved.
Your largest customers make demands that you readily agree to, whether they’re about terms, fulfillment, special packaging, displays or product modifications.
If anyone but the largest customer makes a similar request, they’re usually ignored with the attitude of “Well, what do they expect?” or “We have the best customer service program; it’s the customer’s fault if they don’t recognize that.”
Most building materials companies are at higher risk of losing their small- and medium-sized customers. And just like a sales upswing creates momentum for more growth, customer losses create momentum in the wrong direction.
A million here and a million there can start to add up pretty quickly.
I interview a lot of builders, contractors, distributors, and dealers. They all tell me they have the same three problems with building materials companies.
- Uneducated Reps
According to your customers, 70% or more of the sales reps they deal with don’t know anything about their business. They may be good salespeople and know their product, but they have no idea how the business of being a builder, contractor, distributor or dealer works.
When that’s the case, all the customer hears is “Here’s my product. It’s great. You should buy it, but I really don’t know why this is a good idea for you.”
- Not Heard or Respected
Any request they make is not taken seriously. Your customer assumes it won’t even be considered. Even when they have a good relationship with their rep, the rep tells them their request will be ignored.
The rep knows that no one really listens to them. Headquarters assumes that reps want everything so they can just be ignored.
Many of these requests are not a big deal to the manufacturer, but they would be very helpful to your customer.
- Arbitrary Changes
Companies make arbitrary changes without any input from the customer. “Here’s our new shipping policy. You don’t have a voice in this; it has been decided. And no, we didn’t check with you.”
Your customers have come to expect price increases with barely any advanced notice and little or no explanation.
Companies are looking at ways to improve their situation without considering how these changes will affect their customers.
If you have a customer, you’re at a huge advantage. Your customers tell me over and over again that they are not looking to change suppliers. Many of them don’t even want to meet with a rep from another company.
It’s like you are putting more pennies, nickels, and dimes in a piggybank on a regular basis. But instead of being a vehicle for savings, this piggybank keeps adding up reasons for your customer to stop buying from you.
There is a huge cost in time and effort to convert or win back a customer. The way these customers are treated does not take into account how difficult it will be to win them back if they move on to a new manufacturer.
This “we really don’t care” attitude creates a big opening for your competition to take this customer away from you.
Whenever I make sales calls with my clients, I can always find an opportunity for them to replace the current supplier.
It’s as simple as finding out how their current supplier frustrates the customer. And that isn’t hard to find at all.
Realize the value of your customers and how much it will cost you to replace their business.
Whenever someone suggests a change that is better for you, check with your customers to see how much worse it would be for them.
Senior executives should meet regularly with these customers and ask them:
“How are we doing?”
“What could we do better?”
“What are the things we do that make it harder for you?”
“What frustrates you about doing business with us?”
“Who are your best suppliers – in any category – and what could we learn from them?”
“If you had a magic wand and could change anything we do, what would you wish for?”
The idea is not to assume you’re already doing a great job, which most companies mistakenly do. The idea is that, no matter how well you are doing, you should keep asking the customer in different ways until you get them to tell you how you could help them be more successful.
This is the way you keep customers and reduce the cost of acquiring new ones.
Thanks for the following comments. I’d like to hear your feedback and suggestions.
“These are great questions that should be asked every sales call.”
Contract Sales Account Manager
“Another great article, Mark Mitchell. Per John Jantsch: The lifetime value of a customer is unlimited when you factor…”
The phil Domask Consultancy